Commissioner of Police v Xiong
[2024] NZHC 3180
•31 October 2024
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2019-485-000189
[2024] NZHC 3180
UNDER the Criminal Proceeds (Recovery) Act 2009 IN THE MATTER OF
an application under sections 43, 44 and 49
BETWEEN
THE COMMISSIONER, NEW ZEALAND POLICE
Applicant
AND
KAI XIONG
First Respondent
ZHOUJAN LAI
Second RespondentYINGSHENG XIONG
Third Respondent
CAIQIN AI
Fourth RespondentFUQUAN LAI
Fifth RespondentMEIRONG LIANG
Sixth RespondentANZ BANK NEW ZEALAND LIMITED
First Interested PartyBANK OF NEW ZEALAND LIMITED
Second Interested PartyTHE TRUSTEE OF XIONG’S FAMILY TRUST
Third Interested Party
THE COMMISSIONER, NEW ZEALAND POLICE v XIONG [2024] NZHC 3180 [31 October 2024]
Hearing: (On the papers) Counsel:
B M Finn for Applicant
L C Ord and E T Blincoe for First and Second Respondents A R Davie for Fifth and Sixth Respondents
Judgment:
31 October 2024
JUDGMENT OF LA HOOD J
[1] These proceedings are set down for an asset and profit forfeiture hearing under the Criminal Proceeds (Recovery) Act 2009 (the Act) in the Wellington High Court, commencing 11 November 2024.
[2] The applicant has applied for forfeiture orders in respect of several listed items of property on the basis they are tainted property, namely:
(i)The residential property at 4 Grenville Street, Waiwhetu, Lower Hutt, registered in the name of the first respondent, Kai Xiong, and described in record of title unique identifier 615518, legal description Lot 2 DP 464032 (the Grenville Street property).
(ii)The residential property at 8 Pattie Street, Petone, registered in the name of the first respondent, Kai Xiong, and described in record of title unique identifier WN59A/965, legal description Unit 8 DP 91383, other than the interests of ANZ Bank New Zealand Limited, registered under mortgage number 8183623.2 (the Pattie Street property).
(iii)A boat and outboard motor on a 2000 trailer, registration number 4128R, registered in the name of, and alleged to be under the effective control of, the first respondent (Kai Xiong) (the Trailer Boat).
(iv)Cash amounting to $7,765 together with foreign currency, namely
$AUD355 ($365.56), $USD10 ($14.10), HKDSl,180 ($212.21) and
CNY524 ($106), (Total foreign cash $697.87) recovered from the Grenville Street property, alleged to be under the effective control of the first respondent (Kai Xiong).
(v)The funds held in the ANZ Bank account, number 06-0545-0284584- 50, personalised in the names of the fifth respondent, Fuquan Lai, and the sixth respondent, Meirong Liang, but alleged to be under the effective control of the first respondent (Kai Xiong); amounting to
$196,801.64.
(vi)The funds held in the ANZ Bank PIE Fund call account, number 06- 0545-0284584-01, held in the names of the fifth and sixth respondents (Fuquan Lai and Meirong Laing) but alleged to be under the effective control of the first respondent (Kai Xiong); amounting to $6,923.61.
(vii)The funds held in a BNZ bank account 02-0544-0258376-097 held in the names of the fifth and sixth respondents (Fuquan Lai and Meirong Laing) but alleged to be under the effective control of the first respondent (Kai Xiong) amounting to $33,602.07.
(viii)Cash amounting to $15,495.00, recovered from 10/6 East Street, Petone and alleged to be under the effective control of the first respondent (Kai Xiong).
[3] The respondents have filed applications for relief from forfeiture and/or indicated they oppose forfeiture of the listed items of property in the asset forfeiture order application (AFO).
[4] On 19 August 2024, Cull J extended the duration of the consolidated restraining order over all the listed property, which is now due to expire on 25 August 2025.1
1 Commissioner of Police v Xiong HC Wellington CIV-2019-485-189, 19 August 2024.
[5] On 16 October 2024, following the filing of a joint memorandum of counsel, Grau J approved a settlement proposed by the applicant, the third and fourth respondents and the third interested party, whereby:2
(i)the Grenville Street property is released from the current restraining order;
(ii)the applicant is to discontinue the current asset forfeiture application in respect of the Grenville Street property;
(iii)the third and fourth respondents and third interested party may then be removed from the proceedings; and
costs lie where they fall.
[6] The remaining parties (the applicant, the first and second respondent, and the fifth and sixth respondent) have conferred and reached a proposed settlement regarding the remainder of the property listed in the AFO application.
[7] The Court’s approval of this proposed settlement of the proceedings is sought under s 95(3) of the Act.
Legal Principles
Section 95 of the Act provides:
95High Court must approve settlement between Commissioner and other party
(1)The Commissioner may enter into a settlement with any person as to the property or any sum of money to be forfeited to the Crown.
(2)A settlement does not bind the parties unless the High Court approves it.
(3)The High Court must approve the settlement if it is satisfied that it is consistent with—
(a)the purposes of this Act; and
2 Commissioner of Police v Xiong [2024] NZHC 3020 at [11].
(b)the overall interests of justice.
The purpose of the Act is set out in s 3 as follows:
3 Purpose
(1)The primary purpose of this Act is to establish a regime for the forfeiture of property—
(a)that has been derived directly or indirectly from significant criminal activity; or
(b)that represents the value of a person’s unlawfully derived income.
(2)The criminal proceeds and instruments forfeiture regime established under this Act proposes to—
(a)eliminate the chance for persons to profit from undertaking or being associated with significant criminal activity; and
(b)deter significant criminal activity; and
(c)reduce the ability of criminals and persons associated with crime or significant criminal activity to continue or expand criminal enterprise; and
(d)deal with matters associated with foreign restraining orders and foreign forfeiture orders that arise in New Zealand.
[10] In Commissioner of Police v Li, Woolford J considered what might amount to “the overall interests of justice” as outlined in s 95(3)(b) of the Act:3
[32] A broad inquiry is required. Section 95(3) indicates that much, referring to the “overall interests of justice”. But in making the s 95(3) determination, the following factors may be relevant:
(a)Whether the settlement amount adequately reflects the property allegedly derived from criminal activity or income unlawfully derived.
(b)The strength of the Commissioner’s case, the respondent’s case, and accordingly, the likelihood of forfeiture if the case was not settled. Litigation risk should be considered. It may be appropriate to settle for less if the Commissioner’s case has significant shortcomings.
(c)If there is a shortfall between the settlement amount and the property allegedly derived from criminal activity or income unlawfully derived, the Court should consider the extent to which there are assets available to meet that shortfall.
3 Commissioner of Police v Li [2018] NZHC 1566.
(d)The time, cost and resource savings that would flow from settlement.
(e)Any other relevant matters, keeping in mind that decisions to settle proceedings can be made on economic and pragmatic grounds. Does the settlement reflect a common-sense compromise between the parties?
[11] In Commissioner of Police v Cherrington, Toogood J, when deciding whether or not to approve a settlement agreed between the parties, said:4
[20]I have taken into account the following considerations:
(a)civil litigation incurs substantial costs for the parties, a significant portion of which would not usually be recoverable under the rules of Court relating to payments of costs;
(b)it is in the public interest to avoid the burden on the Court of complex and lengthy civil litigation;
(c)there is also strong public interest in litigation of this nature being brought to a prompt conclusion, so long as the settlement reflects the likely costs and risks inherent in the determination of a contested application;
(d)approval of any settlement by the Court acting in its supervisory jurisdiction requires consideration of the legislative intent and the overall interests of justice and is not a rubber-stamping exercise; and
(e)a broad inquiry is required, recognising that the decision to settle proceedings under the Act may be made on economic and pragmatic grounds and often reflects a “common sense compromise” between the parties.
Proposed terms of settlement
First and second respondents
[12]The applicant alleges that the items of property listed at paragraphs 2(b), (c),
(d) and (h) above are tainted property having been wholly or partly funded using the proceeds of the offending of the first and second respondents, namely:
4 Commissioner of Police v Cherrington [2022] NZHC 1396.
(i)Obtaining government funds by deception,5 namely a total sum of
$135,532.79 in estimated overpayments from the Ministry of Social Development (MSD). This comprises alleged student allowance overpayments to the second respondent and benefit overpayments to the first and second respondents during the period 13 December 2010 to 1 April 2019 (MSD offending).
(ii)Tax evasion contrary to s 143B(l)(c) and (g), of the Tax Administration Act 1994 (Tax evasion). The applicant alleges that the first and second respondents have knowingly evaded around $141,000 in taxes that ought to have been paid to the Commissioner of Inland Revenue, through either:
(i)Not fully or accurately reporting income received by them for tax assessment purposes, most obviously through the first respondent’s “daigou” trading; or
(ii)Claiming as business expenses multiple items of what ought to have been classified as private expenditure to obtain tax benefits to which they were not entitled.
[13] The applicant alleges that the first and second respondents thereby benefited and/or obtained property through significant criminal activity as defined in ss 6 and 7 of the Act.
[14] The first and second respondents deny that the relevant property is tainted or that they received benefits from the alleged offending to the extent alleged by the applicant. While they accept that they obtained a benefit from the MSD offending and the Tax evasion, they consider the total quantum of that benefit to be less than that alleged by the applicant.
5 Contrary to ss 240(1)(a) and 241 of the Crimes Act 1961, with a maximum penalty of seven years’ imprisonment.
[15] The first and second respondents further allege that the Pattie Street property is either:
(i)Not tainted; or
(ii)If it is, any tainting would be sufficiently limited relative to the value of the equity in the property such that forfeiture of the Pattie Street property would be disproportionate in the circumstances.
[16]The applicant and the first and second respondents are each mindful of:
(i)The potential costs of arguing the AFO application in a hearing set down for a week and involving in excess of 30 affidavits and thousands of pages of evidence.
(ii)Litigation risk for all parties. This arises from the uncertainties in assessing the full extent of the benefit obtained by the first and second respondents from the MSD offending and the Tax evasion and relatedly the extent of the alleged tainting of the Pattie Street property. The first and second respondents have a reasonable prospect of obtaining some degree of relief from forfeiture in respect of their interests in the Pattie Street property.
[17] The total value of the property listed at paragraphs 2(c), (d) and (h) above (before considering interest accrued) is $32,546.42. The Official Assignee has advised that $3,029.26 in interest has accrued on those items of property, so that their total value is $35,575.68. The first and second respondents propose refinancing the Pattie Street property to obtain a loan of $200,000. The applicant’s position is that forfeiture orders against the first and second respondents with a total quantum of
$235,575.68 would meet the purposes of the Act, in that it would forfeit property that represents a value approximating the unlawful benefit the respondents have received from their significant criminal activity. It would also be in the overall interests of justice, considering matters such as costs (to the parties and the public), litigation risk and finality.
[18] Accordingly, the parties propose under s 95 of the Act the following settlement for the Court’s approval:
(a)The Court make profit forfeiture orders and asset forfeiture orders against the first and second respondents as follows:
(i)Assets forfeiture orders are made against the property listed at paragraphs 2(c), (d) and (h) above, plus all interest on those sums accumulated since then, on the basis that it is tainted property under the effective control of the first respondent, for the reasons set out in the AFO application.
(ii)That property vests in the Crown absolutely and remains in the custody and control of the Official Assignee.
(iii)The value of the benefit obtained by the first and second respondents from their significant criminal activity during the relevant period, namely the MSD offending and the Tax evasion, is $235,575.68.
(iv)The maximum recoverable amount for the purposes of the profit forfeiture order sought is $200,000. That is the value of the benefit as determined by the Court, deducting from that the value of the property to be forfeited to the Crown as a result of a type 1 assets forfeiture order made in relation to the same significant criminal activity to which the profit forfeiture order relates (namely, the assets at paragraphs 2(c), (d) and (h), plus interest accrued).
(v)The property to be disposed of to meet the amount owing under the profit forfeiture order is loan monies of $200,000 to be raised by the first and second respondents through refinancing of the Pattie Street property, and paid to the Official Assignee
within two months of the date this settlement is approved by the Court.
(b)The restraining orders are to be varied to allow the Official Assignee to remove the notations of the restraining orders from the records of title of the Pattie Street property, to facilitate the first and second respondents raising loan monies through refinancing the Pattie Street property, to satisfy the profit forfeiture order.
(c)Costs are to lie where they fall.
The fifth and sixth respondents
[19] The applicant alleges that the fifth and sixth respondents have unlawfully benefited from significant criminal activity by obtaining government monies by deception contrary to sections 240(1)(a) and 241 of the Crimes Act 1961. The total allegedly obtained by them is $122,498.56.
[20] The fifth and sixth respondents have accepted that they received payments to which they were not entitled. They have entered a repayment plan. They have been repaying the monies taken and owed by them to the MSD at the rate of $20.00 per week from 5 March 2021 to the present date. The total sum still owed by them to the MSD as at 8 August 2024 was $107,178.56. Their ability to repay the monies owed has been restricted by the restraint of the funds in the accounts at paragraphs 2(e), (f) and (g).
[21]The parties have conferred:
(a)It is accepted by the fifth and sixth respondents that they obtained unlawful benefits from significant criminal activity as alleged.
(b)The applicant accepts that the related allegations of money laundering do not materially increase the benefit alleged to have been obtained by the fifth and sixth respondents. The extent of any benefit to them from
that alleged offending (which is not accepted by the respondents) is not readily quantified.
(c)There is a prospect of the fifth and sixth respondents obtaining relief from forfeiture in respect of some of the tainted money held in the accounts listed at paragraphs 2(e), (f) and (g) above.
(d)The fifth and sixth respondents have already repaid to the MSD part of the debt they owe.
(e)The MSD have indicated that, if forfeiture orders are made in respect of the balance of the money owed out of the restrained funds, then the debt of the fifth and sixth respondents will be expunged.
[22] Accordingly, the parties propose the following settlement for the Court’s approval under s 95(3) of the Act:
(a)The Court makes profit forfeiture orders against the fifth and sixth respondents as follows:
(i)The value of the benefit obtained by the fifth and sixth respondents from their significant criminal activity during the relevant period is $107,178.56.
(ii)The maximum recoverable amount is $107,178.56.
(iii)The property to be disposed of to meet the amount owing under the profit forfeiture orders is money from the funds held in the ANZ Bank account, number 06-0545-0284584-50, personalised in the names of the fifth respondent, Fuquan Lai, and the sixth respondent, Meirong Liang (described at paragraph 2(e) above).
(b)The balance of the monies in the accounts at paragraphs 2(e), (f) and
(g) is released from restraint upon discharge of the profit forfeiture orders.
(c)By consent, the fifth and sixth respondents can then be removed from these proceedings, with costs to lie where they fall.
[23] It is again submitted by the parties that the settlement meets the ends of the Act, in that the orders proposed reflect the unlawful benefit derived by the fifth and sixth respondents from their significant criminal activity (to the extent that has not already been repaid to the public), and is in the overall interests of justice, from the perspective of cost savings, litigation risk and finality.
Decisions and orders
Proposed settlement
[24] I accept that the proposed settlement is consistent with the purposes of the Act and the overall interests of justice. The orders result in forfeiture of property that represents a value approximating the unlawful benefit the respondents have received from their significant criminal activity and will be in the overall interests of justice considering matters such as costs to the parties and the public, litigation risk and finality.6
Orders
[25]I therefore make orders against the first and second respondents as follows:
(a)The following profit and asset forfeiture orders:
(i)Assets forfeiture orders are made against the property listed at paragraphs 2(c), (d) and (h) above, plus all interest on those sums accumulated since then, on the basis that it is tainted property under the effective control of the first respondent, for the reasons set out in the AFO application.
(ii)That property vests in the Crown absolutely and remains in the custody and control of the Official Assignee.
6 The applicant has confirmed that MSD will take no further action against the first and second respondents in respect of the MSD offending assuming proceedings are settled as proposed.
(iii)The value of the benefit obtained by the first and second respondents from their significant criminal activity during the relevant period, namely the MSD offending and the Tax evasion, is $235,575.68.
(iv)The maximum recoverable amount for the purposes of the profit forfeiture order sought is $200,000. That is the value of the benefit as determined by the Court, deducting from that the value of the property to be forfeited to the Crown as a result of a type 1 assets forfeiture order made in relation to the same significant criminal activity to which the profit forfeiture order relates (namely, the assets at paragraphs 2(c),
(d) and (h), plus interest accrued).
(v)The property to be disposed of to meet the amount owing under the profit forfeiture order is loan monies of $200,000 to be raised by the first and second respondents through refinancing of the Pattie Street property, and paid to the Official Assignee within two months of the date this settlement is approved by the Court.
(b)The restraining orders are to be varied to allow the Official Assignee to remove the notations of the restraining orders from the records of title of the Pattie Street property, to facilitate the first and second respondents raising loan monies through refinancing the Pattie Street property, to satisfy the profit forfeiture order.
(c)Costs are to lie where they fall.
[26]I therefore make orders against the fifth and sixth respondents as follows:
(a)The following profit forfeiture orders:
(i)The value of the benefit obtained by the fifth and sixth respondents from their significant criminal activity during the relevant period is $107,178.56.
(ii)The maximum recoverable amount is $107,178.56.
(iii)The property to be disposed of to meet the amount owing under the profit forfeiture orders is monies from the funds held in the ANZ Bank account, number 06-0545-0284584- 50, personalised in the names of the fifth respondent, Fuquan Lai, and the sixth respondent, Meirong Liang (described at paragraph 2(e) above).
(b)The balance of the money in the accounts at paragraphs 2(e), (f) and
(g) is released from restraint upon discharge of the profit forfeiture orders.
(c)By consent, the fifth and sixth respondents can then be removed from these proceedings, with costs to lie where they fall.
La Hood J
Solicitors:
Luke Cunningham Clere, Wellington for Applicant
Ord Legal, Wellington for First and Second Respondents Treadwells, Wellington for Fifth and Sixth Respondents
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